C/65-12
FINANCING DEVELOPMENT PLANS
IN WEST AFRICA
Ona
B.
Forrest
This is a revision of a paper originally prepared for
the Dag Hammarskjbld Foundation Seminar on International Financing and Development Planning, Lagos, 1964,
as Working Paper No. 1. The seminar version has also
been published by the Institute of Business Studies, University of Uppsala, in Sune Carlson and 0. Olakanpo, International Finance and Development Planning in West
Africa, Lund: Haken Ohlssons Boktryckeri, 1964.
Center for International Studies
Massachusetts Institute of Technology
Cambridge, Massachusetts
March 1965
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
CONTENTS
The Problem
The
and Its Setting
1
The Plans
4
Review of Past Trends
9
Flow of Resources
and Finance
12
Domestic Resources for the Private Sector
17
Domestic Resources for the Public Sector
19
Foreign Savings and Foreign Exchange
30
Conclusion
38
Tables
43
m
-
m
-
-
---
--
-
-
-
---
-
-
FINANCING DEVELOPMENT PLANS
IN WEST AFRICA
Major increases in investment will be required to achieve the growth
rates projected in current West African development plans.'
To finance this
investment will call for a parallel increase in the flow of aggregate savings,
both domestic and foreign.
This paper examines the supply of investment
finance as envisaged in the development plans, its sources, and the resulting problems of financing the plans.
The Problem and Its Setting
The fundamental problem of implementing the current development plans
in West Africa is the general shortage of resources to finance the necessary
level of investment called for by the plans.
I The plans considered here are those for which at least some of the
needed information was available, namely: Mauritania,
Senegal,
Mali,
Guinea, Sierra Leone, Ivory Coast, Upper Volta, Niger, Ghana, Cameroun,
and Nigeria. The area of West Africa is usually regarded as also compris-
ing Liberia, Gambia, and Togo.
2
The growth rate projected in most of the current development plans of
the region hovers around 4 per cent per annum, which approximates the rate
of economic growth reached by quite a large number of countries in tropical
Africa during the 1950 decade.
Although the corresponding rate of increase
(and more) in investment was achieved by several West African countries,
notably Ghana and Nigeria, during that period, the volume of investment required to achieve the currently planned increase in output is substantially
larger than before (see Table 3),
and few of the favorable economic factors
that made the rapid expansion of the fifties possible are still at work.
The present unfavorable state of world markets for most African products is well known, and no significant change is foreseen in the immediate
future.
Low export prices have caused a continuous decline in public rev-
enue and are a major factor responsible for the diminishing contributions to
investment finance from that source.
In contrast, current government ex-
penditures, already at high levels, are likely to continue to expand rapidly
as a result of further demand for social and other public services and the
additional recurrent costs arising from the implementation of the present
plans.
Although controls on aggregate consumption, private and public, are
a feature of several plans, they are difficult to apply and take time to become effective, as the 1962-1964 experience in Nigeria, Senegal, and Ghana
has shown.
The total flow of resources to the area rose significantly between 1955
and 1961 from bilateral, public sources.
However, this assistance reached
3
a high plateau in 1959 and 1960, and the present uncertainty of political and
economic conditions in many of the countries makes it unlikely that such assistance will resume its expansion at previous rates.
In fact, French public
aid to its former West African territories has remained roughly the same
since 1960.
Multilateral assistance continues to increase, but its contribution may
not be sufficient to compensate fully for the slowing down of the rate of increase of bilateral aid or to increase substantially the total volume of public
external resources at the disposal of the region. In spite of the unfavorable
outlook, however, most plans show a greatly increased reliance on finance
from foreign public sources, which are expected to provide more than one
half of total investment (see Table 1).
As to private foreign capital needed,
it will probably continue to flow into selected countries, but the over-all
trend of such transfers to the region has been downward, and the prospect of
sufficient foreign savings to compensate for the deficiency of domestic resources is thus quite uncertain. Taking all these trends together the projected volume of investment looms large, and many countries may have difficulties in achieving their investment and growth targets.
In the French-speaking countries the dissolution of political and economic groupings has created a multitude of small states, multiplying the
problems of development by more than their number.
Even a cursory look
at the investment programs brings out the urgent need to coordinate and
harmonize on a regional basis the projected expansion of both infrastructure
4
and productive investment in order to minimize costs (present and future),
increase the productivity of investment, and make more effective use of the
scarce financial, physical, and administrative resources available to the
group. 2 With few exceptions the French-speaking countries rely almost entirely on foreign capital to finance development in the public sector.
is,
There
however, a limit to the amount of foreign capital an economy can use-
fully absorb, in particular when the foreign inflow is large in comparison to
the domestic contribution, as here.
Hence it is essential that every effort
be made to encourage domestic savings and to increase their contribution to
the financing of investment, which would also widen the opportunities for
development in the indigenous industrial sector as well as in the agricultural
sector producing for the domestic market.
The Plans
In general the current development plans of Nigeria, Ghana, Senegaland to a lesser extent Sierra Leone-are comprehensive in the sense that an
aggregate model of the economy was used to establish the broad framework
for the targets of total output and its distribution among consumption, investment, and exports.
2 0n
Nevertheless,
the plans are in essence public
the subject of cooperation in economic planning see Approaches to
African Economic Integration towards Co-operation in Economic Planning
and an African Common Market, Note by the Secretariat of the United Nations Economic Commission for Africa, dated May 7, 1963.
5
sector capital expenditure programs, establishing quantitative targets and
priorities and incorporating only a few of the financial and other policy
measures needed for their implementation. Although the private sector is
integrated in the over-all objectives of the plans, its relative importance
varies, depending on each government's economic philosophy, the scope and
initiative of the private sector, the pattern of investment desired, and similar considerations. 3 Usually priorities and the quantitative targets of the
private sector are merely suggested.
In the French-speaking countries of West Africa, comprehensive development planning is still at an early stage.
At present only Senegal can be
said to have formulated an articulate integrated four-year development program that is being implemented.
In a number of countries (Upper Volta,
Mauritania, Chad, Niger) current "plans" are no more than government
capital expenditure budgets consisting of a series of separate development
projects that are often not related to each other and only loosely to the plan
targets where these are stated. In other plans, the underlying assumptions
are not made clear, or the sector targets for output and investment are inconsistent. Some of these plans (such as those of Niger and Upper Volta) are
"transitional, " covering a period of two to three years during which time
basic economic data will be collected to permit the formulation of long-term
development programs on firmer grounds.
3
See, for instance, the difference in the relative magnitude of private
investment projected in the plans of Ghana,
socialist-oriented states.
Senegal,
and Mali-all three
6
Most important, however, is the fact that the majority of the plansagain the exception is Senegal-are only vaguely operational in the sense
that decisions with respect to investment and other policy matters are often
made by the government without reference to the plans' objectives and priorities.
For example, some of the investment projects financed by the French
Fonds d'Aide et de Cooperation or by the European Development Fund (and
often established with their technical assistance) or by the international aid
organizations are outside investment programed under the development plans.
As it were, the procedure by which most of the financing is provided seems
to discourage over-all programing; decisions regarding financing are made
on the merits or demerits of each individual project (or group of related
projects) and are thus strictly on a project basis.
Table 2 summarizes in national income terms some aggregate targets
of the development plans currently in operation in West Africa.
For pur-
poses of comparison the table also provides, if available, information on
actual performance in recent years.
The relative magnitude of total investment or of only the planned public
investment program can be measured in various ways.
Among others, it
can be measured in comparison to total capital formation in the economy,
in comparison to public investment in the national income sense, or in relation to actual public investment outlays under previous plans.
In Table 3,
yearly increases in public investment under successive development plans
are shown in one column and actual public development outlays in matching
7
periods in the other column. As may be seen, in absolute amounts the present programs will call for large increases in total investment. 4
Given a certain amount of resources the composition of investment has
considerable influence on the rate of economic growth and on the speed of
economic returns on investments.
Table 5 shows that in their current plans
the governments of Ghana and Nigeria in particular have shifted resources in
favor of immediately productive sectors.
They have accorded the highest
priorities to agriculture, industry, and technical training, trying among
other things to compensate for deteriorating terms of trade through increased domestic production and import substitution.
The financing of the capital programs by sources of funds as projected
in current development plans is shown in Table 1.
An outstanding feature of
this table is the large share of the finance that is expected to be forthcoming
from external funds.
While in the French-speaking countries the dependence
on foreign savings to finance their development programs continues the traditional pattern of preindependence days, in the English-speaking countries
of West Africa the reliance on external sources of finance to such an extent-half of the total and half of the public investment-is new. 5 Futher-
4
Since the figures presented in Table 3 are straight yearly averages,
they magnify the contrast between the two sums: In the initial period of a plan,
annual capital expenditure is usually lower than the average, while it is much
higher than the average during the last years of the plan.
5
Ghana may appear to be an exception, but Ghana has not included in its
8
more, a financing gap remains, which accounts for approximately 10 per
cent of public investment in the Ghanaian and Nigerian plans.
This "re-
sources gap" or "savings gap" indicates that, although expenditure has been
planned at a certain level, the funds to finance it are not yet in view. However, should the world market price for the main export commodities rise
above the price on which calculations for the plans were based or should any
other determinant of aggregate savings perform better than planned,
the
"resources gap" would disappear. 6
Internal resource mobilization through contributions to investment inthe
form of direct labor in community development programs and similar
schemes, termed "human investment" in the plans, is envisaged in the development plans of the French-speaking countries, where the nonmarket
sector is still extensive and domestic cash savings are particularly low (see
Table 1).
Sierra Leone's plan refers to similar arrangements in its "non-
fiscal methods of resource mobilization. " In Ghana's plan, however, "direct
labour investment," estimated at 10 per cent of the total capital program,
refers to nonmonetary investment in agriculture and housing.
current program the foreign capital already in hand (GE100 million, that is,
two fifths of the foreign savings shown in Table 1 as required to finance
the program) that is to be used to finance its seven-year development
plan.
6 There can of course be a combination of different favorable factors to
fill the financing gap.
9
The continuing trend toward increased participation of the public sector
in the economy is evident in the projected distribution of investment between
the public and the private sector, with the bulk of finance in most countries 7
expected to come from public sources.
Except in Nigeria, where private in-
vestment has always accounted for roughly two thirds of the total, the
planned proportions of public and private investment in the total represent
pretty much the respective shares in total capital formation observed in the
various West African countries during the 1950's.
In Nigeria, however, the
preponderance of planned public investment-67 per cent8 -was
decided upon
by the government for special policy reasons and perhaps on other than
purely economic grounds.
Review of Past Trends
As this current planning period begins, the financing picture is a complete reversal of the situation that existed in the sterling area countries in
1955, when their second development programs got under way. At that time
two thirds of total expenditures budgeted for the public sector under the
7 In the Ghanaian development plan the slightly larger contribution (53 per
cent) of private investment in the total seems to reflect the government's
policy both to reassure the private sector of the economy as to its future and
to encourage private investment, which has been stagnant in recent years.
8 This figure includes significant sums to be transferred to the private
sector for the financing of investment in agriculture and industry.
10
plans were already in hand from domestic sources,
including sterling
assets held abroad.
The supply of finance for development in the English-speaking African
countries has passed through three stages. At the beginning of the "planning
era," high prices and a large export volume resulted in large surpluses on
public account and supplied governments with more than adequate means to
finance development expenditures; at the same time there was a continuous
accumulation of external assets. 9 The limitations on economic growth at
that time were not funds but shortages of physical equipment, plant, and administrative ability. In this early period domestic public funds financed
about 70 per cent and more of planned capital expenditures.
In the second period, roughly the middle and late 1950's, a gradual
softening of world markets cut drastically into both export proceeds and
government income.
In contrast, the level of planned development expendi-
ture increased markedly as expanded absorptive capacity due to past investment, combined with an ample supply of formerly scarce capital goods,
provided the means to accelerate development.
Simultaneously there was a
tremendous growth in recurrent government expenditures:
The pressing
need to provide the finance for increased social and economic services
(education in particular) was accompanied by a steep increase in recurrent
expenditures partly resulting from recent investments.
By 1956 or there-
9 Sterling balances reached their peak in 1955 and 1956.
11
abouts, government expenditures had outstripped current government revenue in most West African countries.
10
In this second period the contribution
of domestic public savings to the financing of development plans increased in
absolute terms although it declined as a proportion of total government expenditure. On balance, however, nearly 80 per cent of total public expenditure
under development plans in Nigeria and Ghana, and somewhat less in Sierra
Leone, was financed from domestic savings (including domestic borrowing in
Sierra Leone). These funds came chiefly from surpluses accumulated in the
past and included, to a far larger extent than before, nonrevenue contributions
in various forms from government institutions such as marketing boards.1 1
The third period began in the fifties when West African countries, while
continuing to draw on their external balances, had to finance their development programs increasingly by loans, internal and external, supplemented
by foreign assistance.
l 0With the exception of Nigeria; Ghana had some budgetary surpluses in
1957 and 1958.
The contribution of the Cocoa Marketing Board to development finance
in Ghana during the 1950-1960 period was probably in the neighborhood of
20 per cent of total public investment under the plans. In Nigeria the marketing boards spent E76 million between 1948 and 1957 on development in the
Federation.
In Sierra Leone the contributions of the Produce Marketing
Board was equally important. On the role of national marketing boards in
African development see United Nations, Economic Commission for Africa,
National Stabilization Measures: National Marketing Boards and Price Stabilization Funds in Africa, Addis Ababa, May 15, 1962 (E/CN.14/STC/CS/1).
12
In the French-speaking countries of the area, external resources of the
metropolitan country have always been the major source of development
finance.
The contribution of the metropolitan country was originally set at
55 per cent of the total cost of the First Development Plan, 1947-1954,
and
that of each territory at 45 per cent. However, this contribution proved too
heavy for most of the territories and had to be financed by loan advances
from French public sources through the Caisse Centrale de la France
d'Outre-Mer.i 2
Gradually, beginning just before the Second Development
Plan, 1954-1957,13 the contribution of the metropolitan country was gradually increased until it reached 90 per cent in 1956, but even the 10 per cent
territorial contribution had to be financed through advances of the Caisse
Centrale.
On balance, domestic sources during this period probably fi-
nanced between 25 and 30 per cent of total development finance in the two
plans.14
The Flow of Resources
and Finance
Domestic savings, private and public, are expected to finance 70 per
cent of total planned investment in Ghana, about half in Nigeria, Sierra
12Since 1960 the Caisse Centrale de Coop6ration Economique.
1 Actually the Second Development Plan was later extended to 1959.
14See France, Ministere de la France d'Outre-Mer,
du Deuxieme Plan, 1954-1957, Paris, 1959.
Le Financement
13
Leone, 15 and Senegal, slightly less than half in Mali, and between 10 and 30
per cent in the remaining countries of former French West Africa (see
Table 1).
During the previous planning period, as has been noted, the high rates
of investment and growth in the English-speaking countries of West Africa
were not matched by equal increases in the rates of current savings.
In-
stead, beginning in 1955, aggregate consumption increased at a faster rate
than output 1 6 and caused a gap between current savings and current invest-
ment. The shortfall in current savings was compensated for by the utilization of accumulated (past) savings and the inflow of foreign capital; thus a
continued high rate of capital formation was still made possible in Ghana,
Nigeria, and Sierra Leone.
By 1963 previously accumulated reserves had
1 Sierra Leone's development plan simply states that "domestic [public]
development expenditures are to be financed from domestic savings. " This
would seem to imply that only the import component of the program is to be
financed from external public sources.
16 In Ghana, private and public consumption expanded at an annual rate of
7 per cent and 7.5 per cent respectively between 1955 and 1961, while output
grew by 4.5 per cent; by 1962 aggregate consumption stood at 86 per cent of
gross domestic product as against slightly over 81 per cent in 1950. In Nigeria personal consumption decreased beginning in 1957, but further increases in public consumption, which rose from 3.6 per cent of gross domestic product in 1950 to 7.6 per cent of gross domestic product in 1960,
kept aggregate consumption at the high level of 91 per cent of gross domes-
tic output throughout the period.
14
been used up or were quite low. Therefore the attainment of investment and
growth targets In the present planning period will depend largely on the increase of the domestic (current) rate of savings out of current income and
the effective utilization of such savings in the planned pattern of investment
to ensure higher output and a further growth of savings.
The domestic savings ratio in Nigeria is projected to increase from 9.5
per cent of gross domestic product in 1960 to about 12 per cent in 1968. In
Ghana it is to rise from 12 per cent of gross domestic product in 1962 to
14.6 per cent in 1969/70,17 and the marginal rate of saving is projected at
21 per cent of gross domestic product compared with an average rate of 12
per cent of gross domestic product in the 1950-1960 period.
To achieve the required increases in domestic savings, the governments
of Ghana, Nigeria, and Sierra Leone expect to cut back the level of aggregate consumption by limiting its increase and keeping it below the annual
growth rate projected for the economy as a whole. Thus in Ghana the level
of aggregate consumption will fall from 86 per cent of gross domestic product in 1962 to a maximum of 80 per cent by the end of the plan. At the same
time, in accordance with the priorities set in the plan, the rate of public
consumption in the sectors of education, health, and agriculture will be allowed a maximum expansion of 4 per cent per annum while all other recurrent government expenditures will be held back. The maximum increase
17 It should be kept in mind that in 1962 the United Nations estimated
that Nigeria's per capita income was $83 and Ghana's $193.
15
allowable for private consumption is 4.5 per cent per year.
In Nigeria the
planned (minimum) growth rate of 4 per cent per annum will have to be exceeded in order to support an increase in personal consumption of 1 per
cent per year, which would account for 12 per cent of gross domestic product in 1967/68.
To help reach their targets, both Ghana and Nigeria have
planned to put into effect appropriate income policies and other measures.
In French-speaking West Africa, aggregate consumption in 1959 was
already running as high as 92-94 per cent of gross domestic product, with
a few exceptions such as Senegal (where it was 85 per cent), the Ivory Coast
(73 per cent), Gabon (87 per cent), and Cameroun (88 per cent).18
Taking the French-speaking countries as a group, total current government receipts were sufficient to cover an average of only 66 per cent of total
current expenditures in 1960.19 The exceptions were Gabon, the Ivory Coast,
and Senegal, which showed moderate budget surpluses.
in most of these countries were negative.
20
Thus public savings
Nevertheless, public investment
as a share of total investment was relatively important, accounting for 80
per cent in Niger and Mauritania, roughly 55 per cent in the Ivory Coast and
18
See France, Ministere de la Coop6ration, Projections et Modeles, by
Henri Leroux (Planification en Afrique, Vol. V), Paris, 1963.
19 Ibid. , pp. 92 and 203.
20 Since 1960, public current expenditures have increased
tremendously;
for example,
the average yearly rate of increase for Senegal between
1960 and 1963 was 20 per cent.
16
Senegal, and about 45 per cent in Cameroun and Upper Volta in 1960. However, with the exceptions just noted, public investment was chiefly financed
from foreign public sources, and an important part of such transfers was
also used to cover current budgetary deficits.
Mauritania, an extreme case,
used all French aid received in the years 1960-1962 to finance budgetary
deficits. 21 In 1961 only 58 per cent of total French aid was for investment;
the remainder was for budgetary support.
Domestic private savings originate chiefly in the foreign enterprise
sector and are quite substantial in Gabon, the Ivory Coast, Cameroun, and,
owing to recent iron ore discoveries and exploitation, in Mauritania. At the
same time there is a considerable outflow of private capital to France,
which in 1959 or 1960 amounted to 70 per cent of domestic private savings
in Senegal, 56 per cent in the Ivory Coast, and 66 per cent in Cameroun. 22
The exact amount of such transfers is difficult to gauge because they are
free within the Franc Zone, but balance of payment figures implied private
capital outflows on the order of 5 to 6 per cent of gross domestic product in
1959 and 1960.
In the same years gross fixed investment for the fourteen
states of the Franc Zone averaged about 12 per cent of gross domestic product, with 4 per cent financed from domestic private savings and 8 per cent
21 See France, Ministere de la Cooperation,
Cing Ans (1959-1964) de
Fonds de l'Aide et de Coop6ration, Paris, 1964, p. 49.
22 See France, Ministere de la Cooperation,
op. cit. , p. 252.
Planification en Afrique,
17
from public foreign transfers. Hence the greater part of public capital inflows served to finance a transfer of private enterprise profits and savings
abroad.
In their current development plans French-speaking countries aim at
high increases in investment to be financed again chiefly by foreign savings
(see Table 2).
The tremendous rates of increase in government consumption
expenditures occurring since 1960 are to be restrained somewhat during the
course of the plans, although the latter do not indicate how this is to be accomplished while-somewhat contradictory-at the same time substantial increases in private and public consumption are also planned. 23
Domestic Resources for the Private Sector
The size of the private sector in development plans reflects, among
other factors, the structure of the economy and the economic policy and political philosophy of the government.
In the West African plans under re-
view, the private sector will contribute between 30 and 55 per cent of total
investment, if we eliminate Mali, which does not acknowledge the existence
of any private sector. A rather surprising feature of the plans is that the
private sector's share in socialist oriented economies like Senegal and
Ghana (47 per cent and 55 per cent respectively) is more important than in
Nigeria, for example, where domestic private investment has always been
predominant and of importance.
23See, for example, the national development plans for Mali and Guinea.
18
The domestic resources required to finance investment in the private
sector in the English-speaking countries are to come mainly from the private savings of individuals and business enterprises, reinvested profits and
other internal resources of foreign and domestic resident corporations
(these two sources accounted for 80 per cent of private capital in Ghana and
slightly less than half in Nigeria),24 and from foreign capital inflows (see
Table 1).
Furthermore, in Ghana and Nigeria the increase in domestic pri-
vate savings is to be partly siphoned off to finance public investment, since
it is the deliberate policy of both countries to restrain the growth of private
domestic investment and consumption alike in favor of the public sector.
However, in both countries the government will channel some investment
finance into the private sector through such institutions as development
banks to back up production targets in priority sectors (agriculture and industry chiefly) in private hands.
The governments will also supply their
share of finance to the private sector when participating in joint ventures
with private capital.
The situation in French-speaking countries has already been discussed.
Here it need only be repeated that personal savings are low, with few exceptions, and that the financing of investment in the domestic private sector depends to a large extent on foreign resident enterprise. Domestic private
24An extreme situation exists in Mauritania, where the large foreign
mining companies are to furnish 98 per cent of total private investment, and
residents and domestic enterprises 2 per cent.
19
enterprise has been gaining some importance since independence, particularly in the more economically advanced countries (Ivory Coast, Senegal,
Togo).
In addition, the governments expect to provide finance for private
investment through direct participation in production and through the various
development institutions that have been established to meet the need for
credit of the small African artisan, farmer, and retailer.
Domestic Resources for the Public Sector
Several countries have made it a matter of policy to cover all domestic
costs of their development program from domestic sources.2 5 In these circumstances the magnitude of the actual domestic contribution in absolute
terms and as a proportion of the entire program could vary appreciably according to the phasing of the individual projects, since more local materials
may become available later on for such large components of the government's investment program as public works.
Table 1 presents the public share of domestic resources in financing the
total capital expenditure under the various plans, while in Table 4 the domestic contributions to public sector finance are shown.
In the English-
speaking countries of West Africa the relative public contributions to overall financing are less than half of the total: about 30 per cent in Ghana and
25 See Ghana, Seven-Year Development Plan, p. 274, and Sierra Leone,
Ten-Year Plan of Economic and Social Development for Sierra Leone,
1962/63-1971 72, Freetown: Government Printer, 1964.
20
40 per cent in Nigeria. In the French-speaking countries the range is much
wider-from 8to 10 per cent in Upper Volta and Mauritania to over 40 per
cent in Mali and the Ivory Coast-reflecting the great divergencies in domestic resources and in the stage of development among the different countries of the Franc Zone.
Domestic sources of finance for the public sector include (a) budget
surpluses; (b) net income from statutory corporations and other governmentowned (or controlled) state enterprises (including state monopolies),
and
revenue from marketing boards and similar government institutions; (c)
domestic borrowing; and (d) deficit financing.
a. Budget surpluses.
The excess of fiscal revenue over expenditure-
accumulated and current-was until 1961 one of the main sources of development finance in the English-speaking countries of the region.
In contrast, in
most French-speaking African countries it has been of little importance in
financing public capital formation since budgetary deficits were prevalent
and French public sources have always provided most of the finance for
public investment.
For example, in 1962 and in 1963 only the Ivory Coast,
Senegal, and Togo were able to balance their budgets without external aid. 26
In the financing schemes of their current development plans Ghana and
Nigeria expect budgetary savings from their current account surpluses again
26 The revenues of these countries include, however,
substantial trans-
fers from France for continuing common services such as military expenses,
airfields, pensions.
21
to cover between one sixth and one third respectively of their planned public
investment.
The Sierra Leone plan simply states that all domestic invest-
ment expenditures under the plan will be covered from domestic sources.
The governments' current revenues will also have to provide for the recurrent costs stemming from the present development programs.
The planned
contribution to development finance is to come primarily from additional
revenue to be raised by new taxation, since at prevailing tax levels current
revenue has been barely adequate to cover current budget expenditures or,
as in Ghana, has been deficient by roughly GE3 million a year.
It is also
hoped that later on taxable capacity will be substantially increased through
the growth of the productive bases of the economies that will result from
planned investment.
In the French-speaking countries the estimated contribution of central
budgets to the development programs varies from 5 per cent in Niger to 16
per cent in Senegal and possibly over 25 per cent in the Ivory Coast. However, these planned contributions are probably rather tentative, judging by
the situation in Senegal, where despite heavy new taxation the capital budget
was in deficit at the beginning of 1964.
It may also be noted that budgetary
expansion on current account had reached, by 1962, the limit of growth foreseen for recurrent expenditure for the entire period of the plan (1961-1964).
Taxation provides about 80 per cent of fiscal revenue in the Englishspeaking countries and roughly 85 per cent in French-speaking Africa.
The
"fiscal burden" (that is, fiscal revenue in relation to gross domestic product)
22
averaged roughly 15 per cent in Ghana and Nigeria in the 1960-1962 period,
but it ranged from 3 per cent in Mauritania to 23 per cent in Senegal, the
median for the Franc Zone countries, including Mali, being 11 per cent of
gross domestic product.
Relatively speaking, taxation is by far the most
important instrument in the hands of governments to increase savings out of
domestic resources for capital formation and development. 27 However, traditional tax systems, little adapted to the new development functions of independent governments,
and poor tax gathering machinery and administration
have kept tax yields low, even if the low tax potential of the region, that is,
the generally low level of income, is taken into account.
Indirect taxes, particularly custom duties, form the bulk of tax receipts.
The great reliance of all African tax systems on foreign trade 28 has been a
serious obstacle to adequate growth in government revenue.
The decline in
export proceeds has affected receipts from export duties and in turn has
brought about a sharp drop in government revenue, while concommitantly
the general instability of the export sector has been transmitted to government revenues and hence to public savings and investment. Direct taxes such
27 On this point see Nicholas Kaldor,
"Will Underdeveloped Countries
Learn to Tax?" Foreign Affairs, Vol. 41, No. 2 (January 1963).
28 In 1959, import and export duties accounted for the following shares
in total revenue: 68 per cent in Ghana, 62 per cent in Nigeria, and 55 per
cent in Sierra Leone.
Food and Agriculture Organization of the United Na-
tions, F. A. O. Africa Survey, Rome, 1962, Table 21.
23
as income taxes have been of little significance, although since independence
they have been introduced in a number of additional countries. In 1962, direct
taxes accounted for over 25 per cent of total revenue only in Sierra Leone,2 9
Niger, Upper Volta, and Mali; and in 1963 and 1964 they became of increasing
importance in a number of other countries-Senegal (17 per cent), Dahomey,
and the Ivory Coast (estimated at 21 per cent in 1964).
Well aware of these deficiencies and faced with the pressing need to increase public savings, most countries in the region have incorporated proposals for far-reaching fiscal reforms in their development plans.
Tax re-
forms aim to change both tax rates and tax bases-increasing the former and
broadening the latter-to tighten the administration of tax laws as well as to
simplify tax assessments, and in general to adopt the tax systems to the
present needs of their economies. 30 Tax reforms are in process in Ghana,
Nigeria, Sierra Leone, Senegal, Mali, and the Ivory Coast. New taxation
introduced includes production and expenditure taxes as in Ghana and
29 In Sierra Leone, as in most African countries, direct taxes are
mainly important for public companies and corporations.
30 The Ivory Coast has introduced an interesting tax to prevent land
speculation in Abidjan and other big cities: New real estate owners within
city limits who hold vacant property lots without constructing buildings on
them (or otherwise putting them to productive use) are penalized by a heavy
tax that is progressive in time and varies with the location of the lot. There
has also been legislation providing for the finance of new investment institutions and of the special investment budget (Budget Special d'Investissement
et d'Equipement) from earmarked tax proceeds.
24
Nigeria, and special taxes earmarked for development in Senegal and the
Ivory Coast.3 1
In order not to defeat its goal, however, new taxation must be highly
selective.
New import duties in Ghana, for instance, have increased gov-
ernment revenue but at the same time have increased the total cost of imports, of which the government itself is a large consumer, thereby damaging the government's balance of payments position. Since the safeguarding
of its external monetary position is of primary importance to Ghana-as to
most developing countries-Ghana has again modified its import tariff with
the chief aim of limiting foreign exchange expenditures: Essential imports
are paying low import duties, while high import duties have been imposed on
nonessential goods and luxury items.
It should be noted in passing that the
drive to substitute locally produced goods for imports, which is a common
feature of all development plans of the region, raises a similar dilemma of
public finance for the developing country, as Nigeria has discovered.3 2
Many countries are also seeking to increase the participation of local
governments in sharing the burden of aggregate government expenditure.
31 In the Ivory Coast a new tax law, called "Contribution Nationale pour
le D6veloppement Economique et Social de la Nation, " was promulgated on
February 2, 1962.
It imposed new taxes consisting of special levies on em-
ployers, on salaries, and of excise taxes on tobacco and spirits.
32See Federal Republic of Nigeria, Federal Government Development
Programme, 1962-1968, First Progress Report, Sessional Paper No. 3 of
1964, Apapa: Nigerian National Press, March 1964.
25
Local governments are to raise taxes and to take over the charges for specifically local services-in Sierra Leone, for instance, the costs of education and water supply.
b. Profits from government enterprises.
Full-cost pricing for the
services of public enterprises and utilities can add materially to the financial resources available for public investment.
Ghana,
33
The development plans of
Nigeria, and Senegal provide for the abolition of most subsidies to
public services-except where the subsidy has an obvious welfare connotation-which should in itself result in substantial savings on current government account.
The proposed revisions of public service rates are to reflect
actual costs, and payment at economic rates for such services should reverse the present trend and put public enterprise on a profitable basis. In
the future, Ghana, Guinea, Mali, Senegal, and other countries that have
adopted a socialist political philosophy, and will be or are already participating directly in the production process of the country on a broad and
widening basis, expect increasing contributions to revenue and development
finance from the profits of their state enterprises.
Guinea and Ghana expect
the sale of goods and services from public utilities, together with profits
from state enterprises, to provide 10 per cent of current revenue during the
present planning periods; Mali's plan expects profits from state enterprises
33 In Ghana, subsidies to housing and transportation have been particularly onerous.
26
to provide 80 per cent of domestic finance in the public sector; and Senegal
expects a 2 per cent contribution to public investment from state enterprise.
In Nigeria the statutory corporations are participating directly in the
government's capital program by investing in the expansion of their own facilities the equivalent of 25 per cent of the cost of the total capital program.
The marketing and produce boards in Sierra Leone, Ghana, and Nigeria are
also expected to contribute materially from their profits and reserves to the
financing of development.
They will contribute either directly through grants
or by investing in government securities; however, the magnitude of their
contributions will depend primarily on the price of their produce in world
markets and also on their own policy.
c.
Domestic borrowing.
Several governments plan to obtain substantial
amounts to finance public investment by borrowing from the private sector.
Senegal, Ghana, and Nigeria plan to raise 8, 10, and 20 per cent respectively
from this source. In order to promote and mobilize effectively personal savings for development finance, most governments intend or are in the process
of establishing a number of new financial institutions (and to broaden existing
ones).
These would offer the potential investor a variety of inducements to
invest his savings in the public sector either directly through the purchase
of government securities or through such government institutions as post
office savings banks,
insurance companies,
and pension funds.
Nigeria
launched a National Savings Campaign in 1963/64 to mobilize the savings of
the small and medium wage earners; the Ivory Coast late in 1963 initiated
27
the First National Bond Issue for economic development through the intermediary of the Soci6te Nationale de Financement, a government corporation
established in the same year. This bond issue, directed at the small and
medium saver, was guaranteed by the government.
Efforts to mobilize domestic resources through borrowing will be com-
bined with the establishment of a variety of development institutions that will
channel investment capital into those sectors of the economy that by the very
nature of their operations have had difficulty in obtaining sufficient finance,
but which have received high priority in the plans. The Nigerian Industrial
Development Bank 34 will provide long-term credit in various forms to indigenous industry (and, incidentally, also act as one of the major channels
for foreign capital), and the new National Agricultural Credit Bank 35 will do
the same for the agricultural sector. In addition, with the aim of increasing
the contributions to loan finance from institutional savers-banks, business
firms, insurance companies (which in Ghana and Nigeria have been required
since 1963 to keep a proportion of their holdings in domestic currencies)-
West African governments intend to use their central banks to promote
34 Established formally in January 1964.
35 The Nigerian Plan makes provision of £3 million for the establishment
of the National Agricultural Credit Bank whose purpose will be "to remove
the major obstacle against rapid agricultural development in the country,
namely, inadequate agricultural credit facilities or lack of finance. " Federal
Republic of Nigeria, Federal Government Development Programme, 19621968, First Progress Report, oE. cit. , p. 10.
28
and organize the sale of government securities to these establishments.
36
The plans of the French-speaking countries give no quantitative indication as to the source or the magnitude of domestic borrowing,3 7 except for
Senegal, which states that 10 per cent of planned public investment will be
financed in this way. On the other hand, there has been a proliferation of
development corporations, development banks, and other special credit institutions with capital supplied usually by the Caisse Centrale de Coop6ration
Economique in various forms.
These institutions are to provide agricultural and industrial credit in the
Ivory Coast, Senegal, Niger, Cameroun, Mali, and Guinea.
In view of their
great number, however, the result may be a dispersal of money and authority to the extent that they may have little or no effect on actually increasing
the availability of finance for investment in production.
d. Deficit financing.3 8 In the accepted sense of the term, deficit financing can be practiced only by countries having their own central bank. Ghana's
36 See Ghana's development plan, p. 244. The Exchange
Control Act of
1961 in Ghana provides that assets held abroad be repatriated.
For the
variety of measures proposed to mobilize savings for government investment
in Nigeria, see the 1962/63 and 1963/64 budget speeches of the Minister of
Finance.
37 The mechanism of money and banking in the African countries of the
Franc Zone is described in "The CFA Franc System, " International Monetary Fund, Staff Papers, Vol. X, No. 36 (November 1963).
38 The issue of whether deficit financing should or should
not be used in
29
financial position at the beginning of the planning period was such that a certain amount of deficit financing had to be envisaged to provide some of the
needed resources to finance its development plan. In its projections of government finance for the plan, deficit financing accounts for slightly less than
14 per cent of the capital program. In 1961/62 a total of nearly GE42 million
was financed from internal loans-of which Treasury Bills accounted for 60
per cent and savings bonds (acquired through the compulsory savings scheme)
provided 12.5 per cent. No deficit financing is foreseen in the Nigerian plan.
Nigeria has borrowed heavily from the central bank since 1962 but is still
within the limits of borrowing set in the plan.
The amount of deficit financing that can be prudently used in African
countries to provide some of the resources needed for investment is limited
not only by a low elasticity in the supply of domestic consumer goods and
services but also by the fact that most of the goods on which such money
would tend to be spent have to be imported.
Hence both inflationary
financing development programs is not under discussion in this paper, which
simply records what can be found in this respect in the different West African development plans.
The International Monetary Fund's view against it is
well stated by Greene S. Dorrance in "The Effect of Inflation on Economic
Development," a paper prepared for presentation at the Conference on Inflation and Growth, Rio de Janeiro, January 3-11, 1963.
In contrast, deficit
financing as a development policy under certain circumstances is discussed
in Dudley Sears,
"A Theory of Inflation and Growth in Under-Developed
Economies Based on the Experience of Latin America, " Oxford Economic
Papers, Vol. 14, No. 2 (June 1962).
30
pressures and balance of payments trouble could develop very fast if deficit
financing is used without restraint as has happened in Mali in 1963 and 1964.
Foreign Savings and Foreign Exchange
The need for foreign savings and foreign capital arises from the general
inadequacy of domestic resources for development.
It is determined in its
aggregate by the projected rate of investment in relation to the rate of domestic savings.
Foreign exchange is also needed to pay for. essential im-
ports for the investment program if domestic savings are available but
cannot be transferred abroad.
Indeed, the "foreign exchange gap" is likely
to be even larger than the "resources gap" (or "savings gap") in the financing scheme of a development program.
"Foreign exchange is a specific
factor of production," as P. N. Rosenstein-Rodan points out, 39 and demand
for this particularly scarce factor rises sharply with increasing investment
such as is projected in current African development plans.
In these plans,
as already noted, West African countries are relying more heavily than in
earlier plans on the contributions of foreign savings to finance both their
"savings gap" and their "foreign exchange gap" (see Tables 1 and 4).
39 "Determining the Need for Planning the Use of External Resources,
paper prepared for United Nations Conference on Science and Technology,
Geneva, 1963, in Organization, Planning, and Programming for Economic
Development (Science, Technology, and Development, Vol. VIII), Washington:
U. S. Government Printing Office,
1962.
31
In view of the close interrelationship between the balance of payments and
the supply of foreign exchange both for current account purposes and for net
investment, the foreign trade sector should be planned as an integral part of
the over-all development program.
Only Nigeria, Ghana, and Senegal have
prepared detailed export and import programs based on certain assumptions
regarding the prices and volume of their main exports.
On the import side,
trade forecasts took into account as much as possible the expected changes
in the structure of exports during the course of the development program (in
Nigeria, ore) and the shifts in imports which should result from planned domestic production and import policies.4 0 Ghana estimated the foreign exchange
component of its development program at one third of total investment, while
Nigeria expects slightly less than half of the total cost of its development
program to come from abroad. In the Franc Zone countries, for the reasons
explained earlier, the proportion of foreign financing in the total is projected
at much higher levels.
In Mauritania and Niger 90 per cent of capital re-
quirements is to come from abroad, implying that nearly the whole program
is to be "imported. "
Private foreign capital inflow to finance private investment is expected
to rise sharply in all Franc Zone countries, except in Mali.
In the mineral
40 For detailed import and export projections see United
Nations, Economic Commission for Africa, Foreign Trade Plans in Selected Countries in
Africa, paper presented to the United Nations Conference on Trade and Development, Geneva, March 16, 1964 (E/Conf. 46/85).
32
rich economies of Gabon and Mauritania (and to a lesser extent, for political
reasons, in Guinea) the planned inflow of private capital has been based, in
general, on the amount of investment programed in their mining enterprises
by the large foreign concerns.
In the Ivory Coast, Niger, and Sierra Leone
a similar procedure has been used, planned investment being based on the
investment projected in their businesses by a group of private companies.
Well aware that in Africa, even more than in other developing countries,
the actual contribution of private foreign investment to development is more
important than the monetary outlay indicates, most countries of the region
have added to the special legislation designed to attract foreign private investment in connection with their current development plans. 41
In the English-speaking countries of West Africa foreign capital inflows
must increase by about 20-30 per cent above the present level in order to
sustain the projected rate of growth and to finance the required import surplus. The net inflow of long-term private funds into Nigeria has been relatively steady since independence, amounting to about $90 million per year
during the four years 1959-1962.42 The annual $75 million projected in the
plan therefore seems to reflect a safe minimum.
For Ghana the record of
41 Examples are the "Investment Code" of Senegal and of the Ivory Coast;
Ghana's Capital Investments Act of 1963 and its projected establishment of a
Development Service Institute in connection with the creation of the National
Investment Board; and the like.
42 International Monetary Fund, Balance of Payments Yearbook, 1963,
Washington, 1964.
33
private long-term capital imports is one of sharp fluctuations, probably in
response to the enactment of strict fiscal measures to control foreign ex-
change in the same period: a net outflow of $5 million in 1960, of $15 million in 1961, and an inflow of $11 million in 1962.43 These figures compare
with an average yearly net inflow of $23 million and total private investment
(including reinvested profits) of about $48 million projected in the plan.
The governments in the English-speaking countries have reserved the
right, through direct and indirect controls, to channel private foreign investment into specific sectors of the economy where foreign initiative and
management are thought to be especially needed and effective.
Joint ven-
tures involving private foreign capital and government participation, direct
or indirect (as, for example, through development corporations), are also
desired, particularly in enterprises where such plan priorities as the
accelerated technical and management training of Africans can be served.
The projected share of external public resources in the finance of public
investment programs is at least 50 per cent in all West African countries
and, as previously noted, accounts for 70 per cent and more of the total in
a few countries of the Franc Zone (see Tables 4 and 1).
Thus failure to ob-
tain the required foreign funds may jeopardize whole development programs
as presently conceived, particularly in such countries as Niger, Cameroun,
and Upper Volta, where foreign capital actually represents total public
43 Ibid.
34
investment, and in countries where projected private foreign investment
is contingent on the economic infrastructure that public investment is to
supply. 44
In addition to the total volume of foreign public finance that may be
available, the terms on which such finance is obtained and the phasing of
foreign capital flows are important.
Developing countries can ill afford to
increase their indebtedness beyond a certain point and to pay high interest
rates on their public foreign debts in view of present uncertain export trends,
low foreign exchange reserves, and steeply rising import requirements due
to projected investments.
There is often a direct correlation between the
share of foreign public funds in total public investment projected in the plans
and the proportion of such finance expected in the form of grants, as the
relative ability to finance the public investment program from domestic
sources is usually in itself a measure of the internal resources thought to be
available for development.
Thus the Franc Zone countries expect most of
their external assistance to be in grants.
French bilateral assistance was
about 84 per cent in grants in 1963,45 and the assistance provided by the
44 See the plans of Mauritania and Sierra Leone on this point.
45 Since 1961 there has been a marked decline in the proportion of
French bilateral assistance given in grant form: from 91 per cent of the
total in 1961, grants declined to 84 per cent in 1963. Development Assistance
Efforts and Policies-1964 Review Report, by Willard L. Thorp,
of the Development Assistance Committee, O. E. C. D.,
1964.
Chairman
Paris, September
35
European Development Fund-the other major source of foreign aid to these
countries-is either in grants or in low-interest, long-term loans. The plans
of the English-speaking countries specify only the total volume of foreign
assistance needed. 46 However, based on past experience there may have
been a tacit expectation that assistance to education and other social type
investment programed would be forthcoming in grant form. The terms of the
United Kingdom's bilateral assistance have varied chiefly with the nature of
the economic project to be financed, also taking into consideration the financial position of the country.
For example, Nigeria received 25 per cent
of its assistance from the United Kingdom during 1960-1962 in grants, while
aid to Gambia was entirely in grants. 47
The proportion of grants in the
United Kingdom's bilateral assistance was always much lower than in French
aid. However, it has been increasing, from 50 per cent in 1961 to 56 per
cent of total bilateral assistance in 1963.
In addition there was a significant
easing of terms for the part of assistance provided on loan terms.
United
States assistance to the region has been chiefly in grants, 48 while the terms
46 For Nigeria see note (c) in Table
4.
47 United Nations, Economic Commission for Africa, International Economic Assistance to Africa, 1962, Addis Ababa, February 1964, Table 9
(E/CN/14/280).
48 On this subject see United States, Department of Commerce, Foreign
Grants and Credits by the United States Government, Washington: U. S. Government Printing Office, biannual report.
36
of aid of the centrally planned communist bloc economies are not precisely
known. 49
Except for the International Bank's long-term loans at, roughly, market
rates, most multilateral public assistance is either in outright grants or in
"soft" loans, the latter accounting for over one half of the total multilateral
aid to West Africa in 1961 and 1962.
It is usually thought that a country's total debt service should not exceed
10 to 15 per cent of its export earnings or what could be financed during a
moderate slump.
France,
50
The external debt of the Franc Zone countries is with
and as long as present monetary arangements are in force the
question of debt service and repayment schedules will not become a serious
issue.
In Ghana and Nigeria, however, the increase in the financing of de-
velopment expenditures through short-term, high-cost contractors' and suppliers' credits since 1962 has been alarming. 51 Both countries are in the
49 For the three years, 1960-1963, total commitments to Guinea, Ghana,
and Mali were $329; total disbursements are not known.
See United Nations,
Economic Commission for Africa, International Economic Assistance to
Africa, 1962, op. cit. , Table 10.
50
See "The CFA Franc System," o.
cit. , p. 377.
51 For the four West African countries, Ghana, Guinea, Nigeria, and Sierra Leone, guaranteed export credits from industrial O.E.C.D. countries increased from $7.1 million in 1960 to $45.1 million in 1962.
Secretariat, quoted in Sune Carlson,
Source: O.E.C.D.
"The Flow of International Capital to
West Africa," Table 9, in Sune Carlson and 0. Olakanpo, International Finance
and Development Planning in West Africa, The Institute of Business Studies,
37
early part of their planning period, when foreign assistance is likely to be
more important than in the later stages of plan implementation, when projected changes in administrative machinery, in institutions, and in financial
policy will have been realized and will have increased (hopefully) the flexibility of both sources and resources.
Another factor that makes the early
years of a plan difficult with respect to external funds is that most external
aid is still given on a project basis. Moreover, the preparatory work on
individual projects and in support of loan applications as well as the actual
loan negotiations are all time consuming and take place during the first
years of the planning period.
For such reasons as the nature and type of aid
given, the assistance provided by France to the French-speaking countries
has resulted in better phasing of aid and in maintaining the time schedules
of the plans with regard to this aid in a number of countries (Senegal, Mauritania, Niger, and Gabon).
The assurance of continuity of foreign aid during the plan period is also
of great importance both to keep the total program within the limits of the
amount of available resources and as an incentive to domestic and foreign
private investment.
The general principle of continuity has usually been
taken into account by aid-providing authorities, although it is often linked
University of Uppsala, 1964. See also, Ghana, Central Bureau of Statistics,
Economic Survey, 1962 and Economic Survey, 1963, Accra: Government
Printing Department, 1963 and 1964; and Federal Republic of Nigeria, Federal Government Development Programme, 1962-1968, First Progress Report, op. cit.
38
with specific project financing. The programing of aid by the European Economic Community is on a five-year basis, but aid is still given for a specific project; 52 the same holds true for the $80 million United States aid
53
envisaged for Nigeria under its 1962-1968 development plan.
Conclusion
"There are indications that financial resources might present a serious
bottleneck to the implementation of the Plan unless drastic measures are
taken to increase available resources" says the First Progress Report on
Nigeria's federal government's development plan,
54
and the same conclu-
sions may be said to hold for the majority of plans here under review at this
point of time.
52 The first implementing convention to the Treaty of Rome, which established the $581.25 million European Overseas Development Fund, was
for the 1958-1962 period. The 1964 Convention of Association envisages aid
of $800 million, also to be distributed over five years.
See European Eco-
nomic Community, Executive Secretariat of the Commission, Convention of
Association, Brussels, 1964.
53 Federal Republic of Nigeria, Federal Government Development Programme, 1962-1968, First Progress Report, op. cit. , p. 4, states: "All
the external financial assistance offered was tied to expenditure on agreed
capital projects in the National Plan and in no case could the loan be drawn
in cash. "
54
Ibid.
39
The time element is important, of course, in assessing the experience
of the countries in plan implementation, which in 1964 was still at an early
stage in many countries.
However, certain shortfalls and imbalances in in-
vestment were too prevalent to be of a passing nature, and would seem to be
caused by inherent features of the West African economies which no amount
of planning can change overnight.
In the first place, there has been a general tendency to overestimate the
marginal rate of savings, that is,
the amount of domestic savings-private
and public-that may be forthcoming as income increases and new policies
and institutions start to operate.
Saving does not depend on income alone;
private saving habits are structural features of a country and need time to
be affected.
The shortfall in private domestic savings was particularly se-
rious in Senegal, which expected 28 per cent of its plan to be financed from
this source.
Such government loans as had to be finally floated on the do-
mestic market to finance the most pressing needs of the development plan
had to be subscribed by public and semiprivate institutions.
In the public sector, budgetary surpluses that were to be used for development financing were either below planned targets or did not materialize
at all. 55 Governments were usually not successful in their efforts to limit
the rate of increase in recurrent expenditures as projected (Ghana, Senegal,
Mali), while the yield from new revenue sources was slow to come.
55 As in Mali, Ghana, Senegal, and Guinea.
A
40
contributing factor to the rise in recurrent expenditure was the general
tendency to implement first projects in the economic and social overhead
category, which usually could be carried out with executive machinery and
techniques well in hand.
Nevertheless, the Federal Government of Nigeria
in 1963 was able to contribute from budgetary surpluses to the development
fund double the amount assumed in the plan. In Nigeria and the Ivory Coast
there was also a certain measure of success in the mobilization of private
domestic savings for public investment through savings campaigns, combined with sales of government securities to the public. 56
In the French-speaking countries, budgetary deficits grew larger in the
fiscal years 1963 and 1964 and occurred in nearly all the countries under
review. Public domestic investment fell short of planned objectives and
plans had to be heavily revised and extended. 57 It should be noted, however,
that planned targets in some countries were obviously originally overambitious in the light of both historic and recent trends. Guinea, Mali, Senegal,
and Niger fall into this category (see Table 2 and Table 3).
56 In Nigeria rough estimates indicate total investment of about $520 million in the fiscal year 1962/63, of which slightly less than 40 per cent was
accounted for by public investment (reply to U. N. "Questionnaire on Economic Trends, Problems, and Policies 1963-64").
This compares with
planned investment of $552 million yearly, of which 67 per cent was to be
public investment.
Thus, although financed from sources other than those
foreseen, the general level of investment planned may be said to have been
reached in Nigeria during the first full year of the plan's implementation.
57 In Senegal, Mali, and Upper Volta.
41
Second, the availability of total financial resources-both domestic and
foreign-has been generally overestimated.
in this respect.
Nigeria's experience is typical
Foreign financing supplied 15 per cent of total expenditure
(instead of the expected 50 per cent) in the federal program and still less in
the regions. The delays in obtaining foreign aid seem to be due in part to
the fact that most aid is given on a project basis and that certain feasibility
studies and preinvestment surveys needed in order to apply for assistance
were not ready. Suppliers' credits and external reserves have been used to
fill the gap-the first nearly exhausting the capacity of Nigeria to service
her debts, the second lowering its reserves to precarious levels.
In the
French-speaking countries private foreign savings have continued to be in
short supply for domestic investment.
(Private investment in domestic ven-
tures has been always slow in French territories, where in colonial days
government participation and insurance against loss were required to bring
forth private investment of any significance.)
At the same time, however,
public foreign investment was ahead of schedule in Senegal, Cameroun,
Niger, and Mauritania.
Third, total plan costs have usually been underestimated (as in Nigeria,
Sierra Leone, Senegal, Cameroun), and inflation and delays in implementation have escalated costs still more.
Fourth, the sectors in which the plan has been fully "implemented"were
the "social and administrative" ones-including the building of infrastructure.
Investment in productive sectors has lagged in nearly all countries. The lag
42
of investment in directly productive sectors has substantially distorted the
planned investment pattern and, if not corrected, will endanger the planned
structure of future production, jeopardizing further the performance of the
economy and the projected increase of the share of domestic savings in the
financing of plans.
T A B L E S
Explanatory notes:
( )
Parentheses have been used around the figure for private
investment when the plan does not distinguish between
domestic and external private investment.
-
Table 1.
Table 2.
Table 3.
Table 4.
Table 5.
Not available.
Projected Financing of Current Development Plans
by Source and Type of Funds
44
Selected Aggregate Growth Targets in Current West
African Plans and Their Implied Assumptions
46
Planned and Actual Public Capital Expenditure
under Selected West African Development Plans-Yearly Averages
48
Projected Financing of Planned Public Investment
by Source of Funds in Selected West African
Countries
50
Distribution of Public Capital Expenditure by
Sector in Current West African Development Plans
52
43
TABLE 1.
PROJECTED FINANCING OF CURRENT DEVELOPMENT PLANS BY SOURCE AND TYPE OF FUNDS
(Million Dollars and Per Cent)
Domestic Sources
Planned Expenditure
Planning
Period
Country
Total
Annual
(million dollars)
Per Capita
Annual
(dollars)
Public
Private
(p e r c e n t)
Guinea
1963-1966
1961-19641
1961-1965
1960-1963
Sierra Leone
1963-1972
4 2 0 .oc
42.0
19.1
75c
(2 5 )d
Ivory Coast
1960-1970
635.0
63.5
18.7
44
( 5 3 )d
Upper Volta
1963-1968
137.0
27.4
6.9
8
13
Ghana
1963-1970
,845.Oe
407.5
56.6
27
Niger
1961-1963
98.0
33.0
11.0
Nigeria (Federal
and Regional)
1962-1968
3,313.0
552.0
10-0
Mauritania
Senegal
Mali
1961-1965
Cameroun
Sources:
Note:
2
117.0
27.0
376.0
9
1
94.0
33.8
28.5
24
28
261.0
52.0
12-1
40
169.3
56.4
17.1
193.8
38.8
9.0
External Sources
Directa
Investment
Private
c e n t)
41
1
4
3
29
56
18
( 2 5 )d
( 5 3 )d
16
33
9
1of
20
5
( 2 8)d
6
61
( 2 8)d
39g
16
28
17
6
15
h
7
i
32
National development plans.
Countries are arranged by their geographical location in West Africa, from north to south.
Percentages are rounded.
Public
(p e r
40
e
10
amp-q
Ww"W""
aw""MIMR
qpwr--
qm - , -
p
TABLE 1 (concluded)
'Referred to as "investissement humain" (human investment) in the French-speaking countries, it would seem to
denote the value of direct labor investment in community development schemes and similar works.
bThe original Senegal plan, 1961-1964, was extended to 1965
at the end of 1963.
cCapital expenditure only. The yearly investment expenditures during the ten-year period, 1962/63-1971/72,
of
the plan are unevenly phased. During the first five years 83 per cent of the total, or $348 million, is to be invested starting with about $90 million in the first year but tapering off to $50 million in the fifth year. During
the second five years of the plan, public expenditure alone is roughly estimated at $72 million, which works out to
an annual average of $14.4 million. The second five-year program is quite tentative and incomplete. Under "public
domestic sources," 75 per cent refers to public financing only; division between total domestic and total external
financing is estimated at between, say, 33 and 40 per cent of program. See text, p. 13.
dIncludes private investment from both resident (domestic) and foreign private sources.
eThe figures for Ghana exclude nearly $168 million already committed to build an aluminum
smelter in connection
with the Volta River project. External sources of finance exclude $280 million (an additional 10 per cent of total)
already in hand.
f"Direct investment" refers here to the labor investment of individuals in the extension and betterment of farms,
construction of homes, and in community development.
Includes capital formation out of recurrent expenditure (19 per cent of total).
hLower estimate:
4 per cent is expected to be invested by foreign resident corporations and
3 per cent by indi-
vidual investors.
Cn
iThe unexpectedly large percentage of "investissement humain" is
not explained.
TABLE 2.
SELECTED AGGREGATE GROWTH TARGETS IN CURRENT
WEST AFRICAN PLANS AND THEIR IMPLIED ASSUMPTIONS
(Per Cent)
Period
Average
Annual
Growth Rate
of GDP"
Plan
Actual
1963-1970
1960-1962
2.7
Plan
Actual
1962-1968
1950-1960
4.0
Plan
Actual
1961-1964
1960-1962
8.0
Plan
Actual
1961-1965
1959-1961
8.0
Cameroun
Plan
Actual
1961-1965
1961-1963
4.6
1.1
1.5-2.0
Niger
Plan
Actual
1961-1963
1959-1961
4.5
Plan
Actual
Plan
Actual
Country
Ghana
Nigeria
Senegal
Mali
Upper Volta
Ivory Coast
-mma
amlofm
mo
Annual
Demographic
Growth Rate
Annual
Increase
in GDP
Per Capita
Total
Increase
in GDPa
Average
Investment Ratio
Investment)
GDP
/
Incremental
CapitalOutput Ratio
(Implied)
2.6
2.6
3.0
0.1
48.0
5.4
17.0
2.2-2.3
2.0
25.0
1.7
46.6
15.0
15.4
3.5
3.8
2.2
2.7
5.0
1.5
48.0
15.0
1.7
12.5
10 . 0
2.6
2.0
2.6
6.0
5.6
3.9
4.1
16.5
3.5
0.4
61.0
9.0
3.5
12.0
10.0
2.7
2.0
15.0
7.0
13.8
2.8
3.0
2.7
2.5
11.0
3.7
1963-1968
1956-1959
4.0
2.7
1.9
1.9
2.1
24.0
9.0
9-15.00
0.4
3.0
2.9
1960-1970
1959-1960
5.6
2.3
3.4
73.0
23.0
3.3
17.7
2.9
3.0
m
0.3
tm
-
m
m
23.Ob
6.0-9.00
8.0
2.9
-
&a
TABLE 2 (concluded)
Sources:
Note:
Based on national development plans for the periods given.
The low incremental capital-output ratios assumed by the plans of the French-speaking countries and
in particular in the Senegal plan refer possibly to monetary fixed investment only, omitting any valuation of
nonmonetary investment.
aIn real terms.
bEstimated on the basis of "commitments
to invest."
CIncomplete and questionable
data.
dGradually rising from 7.5 per cent in 1962
to 15 per cent in 1967.
48
PLAMNED AND ACTUAL PUBLIC CAPITAL EXPENDITURE UNDER
TABLE 3.
SELECTED WEST AFRICAN DEVELOPMENT PLANS--YEARLY AVERAGES
Country and Currency
Planned Expenditure
Period
Expenditure
Nigeria (NE)
Federal government only
Nigeria--all governments
Nigeria--all governments
Sierra Leone
(E)
1951-1957
1957-1959
1959-1963
1963-1970
15.5
1946-1955
1955-1962
1962-1968
5.5
23.5
1950-1955
1955-1959
1962-1967
Guinea (Guinea Fr.)
1953-1957
1960-1963
Ivory Coast (CFA)
1953-1957
Mauritania (CFA)
Niger (CFA)
Senegal (CFA)
Upper Volta (CFA)
Cameroun (CFA)
21.4
50.0
68.o
112.8a
2.2
2.7
1951-1957
1957-1959
1959-1963
13.3
20.0
37.0
1960-1962
42.0
1946-1955
1955-1961
1962-1963
22.0
1950-1955
1955-1960
1.6
4.1
7.0
68.o
20.1
(Billions)
French-speaking countries
Mali (Mali Fr.)
(Millions)
(Millions)
English-speaking countries
Ghana (G E)
Actual Expenditure
Period
Expenditure
I
I
I
I
I
I
I
I
I
2.6
13.0
6.1
(Billions)
1953-1957
3.4
.5b
15
1953-1957
1953-1959
1962-1963
5.2
1960- 1970
1953-1957
1961-1966
2.9
1953-1957
20.0
1961-1962
2.8
5.0
1953-1957
1963-1966
0.7
1953-1957
0.8
1953-1957
1961-1963
1947-1957
1953-1957
1961-1964
1948-1953
1953-1957
1960-1963
1947-1953
1954-1959
1961-1965
0.7
5.3
1953-1957
1961-1963
1.1
2.5c
1953-1957
1961-1963
4.2
1953-1957
1957-1960
1947-1953
1954-1959
1.8
4.7
6.3
7.2
2.2
4.0
12.2
6.6
0.7
1.3
2.3
5.8c
T 5c
9.
1961-1962
5.00
T.oc
10.2
I
I
I
I
I
I
I
I
I
1
I
I
I
49
TABLE 3 (concluded)
Sources:
Based on national development plans.
ries, data for projected expenditures, 1947-1957:
French territoFood and Agricul-
ture Organization of the United Nations, F.A.O. Africa Survey, Rome,
1962, Table 34.
Actual expenditures:
Ona B. Forrest, "Capital For-
mation and Economic Growth," Cambridge, Mass.:
M.I.T., Center for
International Studies, forthcoming.
Note:
Public investment "development expenditure" includes for-
eign aid.
aRevised estimate.
See Federal Republic of Nigeria, Federal Gov-
ernment Development Programme, 1962-1968, First Progress Report,
Sessional Paper No. 3 of 1964, Apapa:
Nigerian National Press,
March 1964.
bEstimated from indicators.
cPublic share estimated from total investment.
TABLE 4.
PROJECTED FINANCING OF PLANNED PUBLIC INVESTMENT
Cn,
CD
BY SOURCE OF FUNDS IN SELECTED WEST AFRICAN COUNTRIES
(Million Dollars and Per Cent)
Planning
Period
Country
Total
Public Investment
As Per Cent
of Total
Programs
(million dollars)
Domestic Resources
Loans
Total
Only
External Public Resources
Grants
Total
Only
(as per cent of public investment)
Mauritania
1963-1966
59.0
50
20
Senegal
1961-1964
203.0
55
261.0
Ghana
1961-1965
1963-1970
37
44
8.o
Mali
53
100
1, 323.0
47
41
5.0
56
54
n.a.
Niger
1961-1963
66.o
72
10
90
n.a.
Nigeria
1962-1968
67
50
50 c
Cameroun
1961-1965
122.0
55
30
70
n.a.
Ivory Coast
1960-1970
678.0
57
58
42b
n.a.
Sierra Leone
1963-1972
350-0
75d
70e
30e
n.a.
Sources:
Note:
80
Table 1 and national development plans.
n.a. = no division into grants or loans is available.
aDoes not include $150 million public investment to be financed out of recurrent expenditure.
bit is not made clear whether the external public aid is included in the total expenditure planned
or whether the $285 million are in addition to the total outlay stated.
n.a.
29
n.a.
c
TABLE 4 (concluded)
c"The tacit expectation was that external finance would be forthcoming in the following proportions:
20 per cent outright grants, 40 per cent conventional term loans (6-10 per cent interest repayable over
10-16 years), and 40 per cent soft term loans."
See Federal Republic of Nigeria, Federal Government
Development Programme, 1962-1968, First Progress Report, Sessional Paper No. 3 of 1964, Apapa:
Nigerian
National Press, March 1964.
dProportion of the first five years applied to total plan period.
eEstimated; see text,
p. 13.
cJ1
TABLE 5.
DISTRIBUTION OF PUBLIC CAPITAL EXPENDITURE BY SECTOR
Cn,
IN CURRENT WEST AFRICAN DEVELOPMENT PLANS
Country
Plan Period
Agriculture
Industry
( a S
Mauritania
1963-1966
1961-1964
12
Infrastructure
p e r
c e n t
o f
Social Services
Administration
t o t a 1 )
8
13
50
44
19
21
3
26
14
48a
7
Guinea
1961-1965
1960-1963
28
18
23
15
5
16
Sierra Leone
1962-1967
8
b
37b
40c
6d
Ivory Coast
1960-1970
14
46e
19
19
2
Upper Volta
1963-1968
37
21
15
17
10f
Ghanag
1951-1959
1963-1970
1961-1963
5
108
3 2g
37
3 6h
12
11
31h
12
25
32
121
Senegal
Mali
Niger
1955-1961
1962-1968
1961-1965
Nigeria
Cameroun
Sources:
Note:
14
23
30
7
9iJ
22
29J
41
28
23
14
21
8
24
10
41
20
5
5
National development plans for the periods given.
"Industry" includes expenditures on trade and electricity.
"Infrastructure" refers to expenditures
on basic facilities such as transport and communications, telecommunications, and the like but not electricity,
unless so indicated. Percentages are rounded and may not add up to 100.
--
so*--- Wm
-
m
m
---
--
-
anw
om
TABLE 5 (concluded)
aMali includes "vehicles" in the directly productive sector, but here they have been shifted to "infrastructure."
bElectricity (11 per cent) is included in "infrastructure."
c"Social services" for Sierra Leone include 34 per cent for health, education, and social welfare; 2 per
cent for water supplies; 4 per cent for housing and country planning.
dIncludes 4 per cent for "public works" not otherwise identified.
eIncludes allocations for electricity, industry, and tertiary services.
fIncludes 8 per cent for research and surveys and 1 per cent for administrative overhead.
Figures are based on Table 2.2, "Distribution of Proposed Plan Expenditures," of the official plan document. Volta River electricity project, a separate item in the official classification, is here included under
"industry," accounting for 7 per cent of total public capital expenditure in the 1963-1970 plan and for
1.4 per cent in the 1951-1959 plan. Other investment for electricity expansion, projected at slightly over
2 per cent in both plans, is also included here under "industry."
"Miscellaneous and contingencies," a separate item in the official classification, is here included
under "administration," accounting for 5.3 per cent of total public expenditure in the current plan and for
2.6 per cent in the 1951-1959 plan.
hWater and sewerage are included under "social services" in both plans (5 per
cent) although in the official classification they are included under "infrastructure."
'Niger allocates 7 per cent for research and surveys and 5 per cent for administrative overhead.
jIncludes electricity: 15 per cent in the 1962-1968 plan and 6 per cent in the 1955-1961 plan.